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ED SCHULTZ, "THE ED SHOW" HOST: THE RACHEL MADDOW SHOW starts right now.

Ezra Klein is filling in for Rachel tonight.

Ezra, good to have you on.

EZRA KLEIN, GUEST HOST: Good evening, Ed. And thank you.

SCHULTZ: You bet.

KLEIN: And thanks to you for joining us at home tonight. Rachel has
a very well-deserved night off.

But we begin tonight, we begin tonight with Election Day. You
remember Election Day when Democrats put their plan for taxes and their
plan for spending up against the Republican plan for taxes and the
Republican plan for spending? Election Day.

The Democrats said we should raise taxes on the wealthy and make
targeted spending cuts. Republicans said no new taxes -- no new taxes at
all and cut programs for the poor like Medicaid and food stamps and housing
assistance and so on.

President Obama won on Election Day. He won with just over 51 percent
of the vote. It wasn`t a huge margin but it was significant and it was
enough that we do not have to stay up half the night waiting for results.

You want to see the really big winner, though, on Election Day? The
idea of raising taxes.

On Election Day, according to the exit polls, more voters said the
government should raise taxes than voted for Barack Obama. Sixty percent
of people said we should raise the revenue for the good of the country.
Almost 50 percent said we should make the rich pay more. Another 13
percent said make everyone pay more. The no taxes, no way, no how, never,
huh-uh, crowd did not come even close.

Now, no one should be surprised that Americans say they want higher
taxes. As unpopular as the idea of writing bigger checks to Uncle Sam
might sound, in the abstract, Americans have been saying that is what they
want. At least that is what they want from rich people for a long time
now. They have said this over and over and over again, in poll after poll
after poll.

From July and August 2012, 65 percent of Americans said we should
raise taxes the way Democrats proposed. That is a 32 percent margin over
the no taxes position.

In the same period, 44 percent of respondents said that raising taxes
on the well off would help the economy. Only a third said it would hurt
the economy.

A couple of months later, October, 64 percent liked the Democrats plan
for raising taxes on the rich and like it by, a 35-point margin.

That right there, that is not a poll on taxes. That is a baby sloth.
We just threw there it for fun before more polls on taxes. Baby sloths
always win the internet.

OK, back to taxes. Another poll on taxes from October 2012. Look at
this.

Asking the rich to pay more gets support from 55 percent of the
voters. The margin is closer but 19 points in politics is not all that
close. Right after the election, a new poll, 60 percent support higher
taxes on the rich.

And in case you`re wondering what message voters said in the election,
what they meant when they said not Mitt Romney, check this out -- a
December poll in which 65 percent of those asked said President Obama now
has a mandate -- a mandate to raise taxes.

Likewise that same month, 57 percent said we should let the Bush tax
cuts on the wealthy expire. Let taxes go up, raise taxes. Taxes math.

Last month, on the other side of the equation on spending, 82 percent
said do not cut Medicare, even more people said don`t cut Social Security,
87 percent -- 87 percent wanted Social Security left alone. In fact,
except for foreign aid, they weren`t into cutting much of anything at all.

With all of this evidence showing the Americans prefer the Democrats
approach, the raise some taxes approach to the federal budget to the
Republican approach, you would think the last thing Republicans would want,
the thing they would be most afraid of is another fight between the
Democratic and Republican budgets. Republicans have the clearly less
popular position here. But after the election when they had lost it at
every single level and decided to back down in Congress over the debt
ceiling the one thing they wanted and something they have wanted for years
now, the one thing they demanded is for Senate Democrats to give them a
budget.

Now something important to note here: the White House has been hanged
out a detailed budget year after year after year. There`s not a year they
have missed. Republicans, every single year, Republicans in Congress hate
it and they oppose it and say it raises too much in taxes and doesn`t cut
spending enough, but it`s there.

House Democrats have also put forward budgets but that is not enough.
Republicans in the House say the Senate Democrats, the Senate Democrats are
the folks who need to give them a budget. For some reason, Republicans
have become really fixated on this idea.

Senate Democrats -- Senate Democrats must produce a budget. It is the
baby sloth of Republican politics. It is always winning.

House Speaker John Boehner is so excited about the prospect of the
budget that is coming now from the Senate Democrats, he thinks the moment
this happens, people will see how much more popular Republican policy is.
Mr. Boehner brought it up. Just this morning, the speaker tweeted, quote,
"McClatchy-Marist poll survey, Americans want spending cuts, quote, `are
not in a mood to increase taxes.`" And then he linked to this poll, this
poll right here just released yesterday.

And it is about the mandatory spending cuts in the sequester and
whether people are noticing them yet and it does include -- it does include
this, quote, "Generally, voters by 53 to 37 prefer to reduce the deficit
mostly by cutting government programs and services rather than mostly by
raising taxes."

Pollster Lee Miringoff saying, quote, "Voters are in no mood to
increase taxes."

Finally, that is evidence, that is a real poll that shows that the
public wants the Republican budget strategy, no more taxes, that the public
wants Congress and the president to slash spending and not raise another
dime in revenues, right?

That after months of polling that show the public wants to raise taxes
rather than take a weed whacker to the budget, survey after survey finding
the public think taxes should go up here. Here, finally, a poll saying
fire up the weed whacker. Washington, go for the spending, and no more
taxes, the fiscal cliff deal was enough.

That would be very cheering news for Republicans. You would
understand exactly why Speaker Boehner is excited, except if you read the
poll, because this poll, the poll that John Boehner really wants you to
see, is actually just like all of the other polls.

Now it`s true. Voters would rather cut spending for energy than raise
taxes and rather cut unemployment insurance than raise taxes, which seems
to me to be a shame. In those two categories, voters would rather cut
money than raise new revenue.

But voters say they would rather raise taxes and cut money from
Medicaid and prefer cutting taxes to money for roads and bridges and
transportation. Voters say raise taxes instead of cutting money for
Medicare, one of our most popular programs.

By an even wider margin, voters say we should raise taxes rather than
cut Social Security -- grandma and cat food not a popular idea. And by an
even wider margin than that, voters say we should raise taxes rather than
cut money for schooling. Apparently, people like the future.

Despite John Boehner`s apparent belief that Republican budget
priorities are suddenly in fashion, this new poll he champions looks a lot
like the other ones. What do Republicans want to do has not gotten more
popular.

And so, Senate Democrats will give them a budget this week. They will
get a budget from Senate Democrats. Christmas now.

And it will be a budget that follows all of this polling with the mix
of tax increases and moderate spending cuts that the voting public has time
and again said it wants. The polling says spending cuts are by and largely
popular, that people prefer taxing the wealthy and making fewer cuts to
Medicare and other programs.

But Republicans seem to convinced themselves deem, they seem totally
persuaded of something that is not true. In the same way they thought Mitt
Romney was absolutely 100 percent going to win the election, in the same
way as they were with the election, Republicans themselves are so excited
about these budgets, so persuaded with their approach of dealing with
government spending and deficits that they are constructing a reality, in
which they believe the broad public, the majority feels the way they do.

But everybody does not feel the way Republicans do. They do not like
the Republican budgets. It`s just not a true fact that they do.

And so, this week, Republicans are going to, once again, as it did in
the election when they put Paul Ryan on the ticket, once again, they will
get exactly what they want -- a fight between their budget and Democratic
budget.

The question is why that is what they want? What is convincing them
this is a good idea?

Joining us now is Melissa Harris, host of MSNBC`s wonderful weekend
morning show, "MELISSA HARRIS-PERRY". That`s very easy to remember.

(LAUGHTER)

KLEIN: Melissa, it`s good to see you.

MELISSA HARRIS-PERRY, MSNBC HOST: Nice to see you, Ezra.

KLEIN: So, why? What is -- what is behind the Republican -- the
intense Republican desire to see a budget from Senate Democrats and have
this fight again?

HARRIS-PERRY: Well, I suspect there might be a couple of things.
One, remember that house Republicans are the group of people most insulated
from the realities of sort of what the electorate wants, right? So, we
remember the electorate wanted President Obama over Mitt Romney, so
President Obama won.

They preferred more Senate Democrats over Senate Republicans. Senate
Democrats are in control.

But the public also preferred House Democrats over House Republicans
and yet House Republicans remain in control. Why? Because in 2010 when
they redrew the district seats, they created for themselves very safe and
often very skewed districts.

So I think when they go home, many -- particularly in the far right --
in fact, are hearing from constituents the same echo chamber about cut
spending, cut spending, cut spending. Because they are relatively
insulated from the realities of public opinion, because they drew districts
that were incredibly safe for themselves, they can have this fight with
relatively little cost to themselves in the 2014 midterms.

KLEIN: So, I completely buy most of that. But the one thing I wonder
about is that Republican -- when you poll Republicans, when you break the
Republicans out of the poll and you ask them, do you think we should raise
taxes as part of a reducing the budget, do you think we should raise taxes
on the wealthy or cut Social Security or cut Medicare, they give Republican
voters the same answer everybody else gives, they say, yes, raise taxes.

So, something is going on, it seems to me, where House Republicans
are, first, further to the right of their constituents on this issue, the
sort of Washington-Grover Norquist consensus is not a national one among
Republicans.

And second, they seem unafraid of these polls. Typically, politicians
are afraid of having a lot of people disagree with them, particularly when
they have just lost an election.

So, you are a professional political scientist. You have a degree in
telling me why this would happen. So, why aren`t they more afraid of the
majoritarian position here?

HARRIS-PERRY: Well, it seems there could be two possibilities. One
is let`s go back to the baby sloth for a moment, right?

KLEIN: I would love to go back to the baby sloth for a moment.

(LAUGHTER)

HARRIS-PERRY: Remember, the baby sloth, the reason we showed it a
couple times there I assume is because it`s extremely popular but no one
thinks that the American public by liking to look at baby sloths or puppies
or panda bears or whatever, they don`t think of that as reasonable.

And so, many leaders will say, well, sure, the voting public wants
this but that is because the voting public is childish and they don`t
realize you have to cut spending to bring down this deficit. So, we`re
going to give them the medicine they need. They might want to look at the
baby sloth all day, but they`re going to have to go to work, right? They
may want to have their cake and eat it too, but we`re going to have to cut
that spending.

So, I think that`s part of them. Some of them see themselves as very
brave. Certainly, we heard that from Paul Ryan.

But I think the other thing is that that come 2014 when they get to
the midterm election cycle, they know that there`s a way they can spin this
and I think it`s in that Marist poll. The fact that when you ask about the
specific policies -- people want to kept their Medicare, their Medicaid.
They want to keep their education and their roads and bridges.

But you can say government spending in the context of, for example,
campaign commercials, and you can get support for that, because when we
hear government spending, we still have this 1980s versions of the welfare
queen who is living high off the hog. And I think that`s part of why that
desire to cut the unemployment insurance, that senses some people aren`t
working hard and, therefore, we shouldn`t be extending government
assistance to them.

So, there`s a political strategy that`s possible and I think there`s
also a kind of we`re better than our constituents and we will lead them to
something that they need.

KLEIN: Melissa Harris-Perry, I think that is a very good diagnosis.
Thank you for being here tonight.

HARRIS-PERRY: Thanks.

KLEIN: Now for the irony alert. One prominent Republican does have a
plan but it leeches on to President Obama`s success to reach its goals.
That is next.

(COMMERCIAL BREAK)

KLEIN: Former Massachusetts Senator Scott Brown -- Scott Brown -- is
making a career move back into the private sector. And where he is going,
he will not need the barn jacket or the pickup truck. I will explain just
ahead.

(COMMERCIAL BREAK)

KLEIN: I have been looking forward to this week two for a very long
time. It is my favorite time of year, my favorite week. It`s budget week.
It`s budget week, the beginning of budget season.

That time of the year when Americans gather together and wear their
traditional budget week garb, pocket protectors and things like that, and
eat their budget week meal, which include, of course, an extremely rich
dessert, which we assume will be offset by future undefined weight loss.

It`s budget week. And the festivities kick off on the Hill tomorrow
with the official release of the House Republican budget.

The following day, Wednesday, Senate Democrats will celebrate budget
week by releasing their budget. There will be dueling budget proposals,
numbers, graphs, appendix tables. What is not to love?

But the reason why I`ve been looking forward to this budget week in
particular, this Republican budget in particular is this.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: We`re committed to
doing a budget and a 10-year plan to solve our budget crisis and to balance
our budget. And, frankly, I think it`s time for the Senate and the White
House to produce a budget that will balance over the next 10 years.

(END VIDEO CLIP)

KLEIN: A balanced budget in just a decade. And, of course, the guy
in charge of crafting the Republicans House budget is former vice
presidential candidate, Wisconsin Congressman Paul Ryan. Congressman Ryan
is also the chairman of the House Budget Committee.

And the reason why it was so exciting to learn the Republicans plan to
balance the budget in 10 years, is because this is way faster than Paul
Ryan`s original deadline for balancing the budget. In Congressman Ryan`s
last plan, we wouldn`t have had a balanced budget for 25 years, until
almost 2040.

So, when I learned he plans to do the same thing in a mere 10 years,
that he has shaved 15 years off that timetable, how? What was he going to
cut? What new things would be in his budget? What sort of austere cuts
were we in for? What did I have to look forward on budget week?

And so, today, on budget day eve, we have learned some details how he
plans to do it. It turns out Paul Ryan is balancing his budget in 10 short
years, in large part, by letting President Obama raise taxes. Watch.

(BEGIN VIDEO CLIP)

CHRIS WALLACE, FOX NEWS: The plan that you`re going to release
Tuesday would balance the budget in 10 years, not 25 years, like your last
one. How do you do that? Do you have to make even tougher, deeper
spending cuts?

WALLACE: Let`s look, Congressman, at a couple of the reasons that you
don`t have it make big changes in this new budget to balance it in 10
years. You include the $600 billion as you just mentioned in tax increases
that came from raising rates from the fiscal cliff debate. You also
include $716 billion dollars in Medicare cuts through Obamacare that you
opposed in this last campaign.

Question: is it fair to say that at least those parts of the
president`s policies make it easier to balance the budget?

RYAN: It is fair to say that.

(END VIDEO CLIP)

KLEIN: It is, indeed, fair to say that. Paul Ryan on "FOX News
Sunday" with Chris Wallace. He went on to say that his budget assumes the
repeal of Obamacare.

And that statement from him that he is going to repeal Obamacare in
his budget, that got a lot of headlines today and caused FOX News anchor
Chris Wallace to do a bit of a double take in the interview.

(BEGIN VIDEO CLIP)

WALLACE: Are you saying that as part of your bug, you would repeal,
you assume the repeal of the Obamacare?

RYAN: Yes.

WALLACE: Well, that`s not going to happen.

RYAN: Well, we believe it should. That is the point. That`s -- but
this is what budgeting is all about, Chris. It`s about making tough
choices to fix our country`s problems.

KLEIN: Paul Ryan, though, he is not actually repealing all of
Obamacare. He is repealing the part that gives people health insurance but
he is keeping as he has in his other budgets the tax increases in Obamacare
and the Medicare cuts -- those same Medicare cuts that he and Mitt Romney
ran against in the election. So, that is a repeal of Obamacare. He
repeals the care part, and keeps the costing you more money part.

And when you put all of that together and you add in some tactical
stuff about how congress`s budget and score keepers have made the
underlying estimates a bit optimistic, when you put all that together, Mr.
Ryan won`t have to do much at all to balance his budget in 10 years. All
he`s got to do is make peace with a bunch of Obama increases in Medicare
cuts that a number of times he and his party have bitterly opposed.

That -- that is the irony of Ryan`s budget this year. The reason he
can get it anywhere balance any time soon is Republicans have passed a
bunch of policies including tax increases and immediate Medicare cuts that
Ryan`s party have sworn to oppose.

It is an interesting take on bipartisanship. I will denounce your
policies in public but then I will use them in my plans. But in budget
season, the happiest and most surprising time of the year, anything can
happen.

Joining us now is Peter Orszag, vice chairman of global banking at
Citigroup, senior fellow on the Council on Foreign Relations, and former
director of the Office of Management and Budget for the Obama
administration.

Peter, it`s good to have you here. Your family must be very excited
about budget week.

PETER ORSZAG, FORMER OBAMA BUDGET DIRECTOR: You have your mom here
for this great event!

KLEIN: Indeed.

ORSZAG: Everyone is celebrating.

KLEIN: I want to talk to you about the goal here, balancing the
budget. This has become a big thing for Chairman Ryan.

What is the -- what is the argument for getting the budget balanced in
10 years? I think intuitively, people think, of course, we should have a
balanced budget, but a lot of economists think that actually hitting that
target is not that important.

ORSZAG: No, I don`t think hitting it that target important and
actually trying to hit that soon is probably a mistake. But what we want
over time is get our fiscal house in order, by which I mean that debt is no
longer exploding as a share of the economy. That doesn`t actually require
balancing the budget and it doesn`t require it over a 10-year window.

KLEIN: And what happens? You`re saying that if you balance a budget
or if you cut the deficit too quickly, it can actually be
counterproductive. So, what do you mean by that? What do you expect to be
the consequences of the budget here?

ORSZAG: Well, the problem with cutting the budget too soon when the
economy is still weak and unemployment rate is high is that that can
exacerbate to unemployment problems. So, what we want -- again, I`m sort
of beating my head against the wall here -- but what we want is actually if
anything, more stimulus up front, more infrastructure investment, coupled
with a lot of deficit reduction that`s phased in gradually over time and
gradually put us on a solid path. That`s not the combination we`re going
to get from the Ryan budget tomorrow.

KLEIN: No, I doubt it is. One of the things I thought was striking
in that interview he did with Wallace was that when it came to the
Affordable Care Act, when it came to Obamacare, he said for at least the
coverage side of it, that what he wanted to do is get it out of there.
That he thought the right policy is not have it there and as such that
policy is reflected in his budget even if at this point, it`s unrealistic.

What was interesting is when got asked about the fiscal cliff tax
increases, he said I don`t want to revisit any of that. That is settled
law. And it seems to be an admission that truly horrible, devastating,
awful things Republicans have been saying will happen if we raise any taxes
in this economy are not happening, will not happen, at least from this
level of tax increase, and actually at this point are happy to have that
extra money in the budget so they can get their budget where they want it
to be.

ORSZAG: Well, I think that`s right, although you have to remember --
I mean, the Ryan budget is going to have a series of magic asterisks in it.
A massive assumption what happens to Medicaid spending, big assumption
about Medicare, none of which is going to happen. And so, what they`re
doing by accepting the revenue is just dialing back ever so slightly the
size of the magic asterisk.

KLEIN: Well, and the other thing they`re going to have is he has a
"Wall Street Journal" op-ed out tonight where they talk about it they want
a tax reform that brings the it down to two rates only, 10 percent and 25
percent. And he is not going to say in this budget how. He says
forthcoming legislation from House Republicans showing how.

But that seems to me to be a very difficult thing to do in an even
mildly progressive way.

ORSZAG: It`s mathematically possible to bring down rates for high
earners, which is what happens when you move to a rate structure like that
without raising rates on low and middle income people if you`re going to
keep revenue constant. It`s just not mathematically possible.

So, the trick in all of these tax plans is typically that there are
some hidden, you know, shell somewhere, because you can`t accomplish all of
the objectives at the same time. Either, it`s a massive revenue loss or
it`s an increase in revenue from middle and lower income taxpayers, period.

KLEIN: And I want to just ask you about the sequester quickly. We
have in the coming months, we have these resolutions to fund the government
and stop the government shutdown and then after that we have another debt
ceiling question coming up in the summer some time.

Do you think that one of these will actually force some sort of
replacement for the sequester or do you think that we are actually going to
have this policy going forward?

ORSZAG: I think the level of spending under the sequester may be
perpetuated but with some reallocation across the categories. And therein
lies one of the problems. Even the Democrats -- let`s just be clear --
even the Democrats are locking into a revenue base that implies pretty
steep reductions in discretionary spending in the part of the budget that`s
set by 2018, 2019, 2020. I think it`s going to be very hard to make the
numbers work even under their approach. It`s even worse under the
Republicans.

KLEIN: But it`s true. There`s been a substantial shift on the right
in the Democratic Party on taxes in recent years, and that was I think
locked into the fiscal cliff deal.

ORSZAG: That`s correct.

KLEIN: Peter Orszag, thank you very much for being here tonight.

ORSZAG: Good to be with you. Thank you. You, too.

KLEIN: Coming up next, the Ezra Klein challenge. It`s like sort of a
two-minute crossfit workout for my brain.

(COMMERCIAL BREAK)

KLEIN: We are here at the favorite, my favorite part of the show. It
is the part where I get to explain anything I want -- even things my
producers don`t really like -- in two minutes or less.

And, today, tonight, I`m going to tell you about one close to my heart
as a Californian. How the Senate has become one of the least democratic
legislatures in the entire world.

OK. We all know the old civics lesson. The Senate is part of the
grand messy political compromise it created the States of America and that
compromise as expressed in the Constitution is this. The Senate of the
United States shall be composed of two senators from each state. That
means each state no matter how many people live in it, they get two
senators and two senators only. Not one, not three, not five.

So it`s not one person one vote in the Senate. It is one state, two
votes.

But as "The New York Times" points out today, when the Senate was
initially constructed, when we founded the nation the United States was
composed of 4 million, not 300 million and the difference between the
biggest state and the smallest was 11-1 -- 11-1.

Today, the difference between the biggest state and the smallest state
between California and between Wyoming is 66-1. So, from 11-1 to 66-1.

And I want to make this clear how unbelievably ridiculous this will
get. The population of Connecticut, of Iowa, Mississippi, Arkansas,
Kansas, Utah, Nevada, New Mexico, Nebraska, West Virginia, Idaho, Hawaii,
Maine, New Hampshire, Rhode Island, Montana, South Dakota, North Dakota,
Alaska, Vermont and Wyoming combine is 38 million people. They have 42
senators.

The population of California is 38 million people. They have two
senators.

This is an unheralded gap. There is nothing like it in Britain or
Canada or France or Germany or Denmark. The only -- the only countries
with anything like it according Yale political scientist Robert Daal are
Russia and Argentina and Brazil.

So, that -- that is the company we are keeping. And we are done. And
I`ve got plenty of time.

And, by the way, before you Californians, we Californians for that
matter, start feeling too bad and because I come from California, I do feel
that mal-apportionment. I now live in Washington, D.C. and we don`t have a
single vote in the Senate, much less two.

But if you get me started on that, it will take me way longer than two
minutes.

Tim Pawlenty, as you may recall, he was a Republican candidate for the
presidency in the not so distant past. Tim Pawlenty or T-Paw as the kids
like to call him. He pretty much crashed and burned as a presidential
candidate. He did not do as well as people thought he would.

He dropped out of the race really before it began. And after placing
a distant third in the Ames, Iowa, straw poll, T-Paw officially called it
quits.

But the reason that Tim Pawlenty was even seen as a feasible choice
for Republicans is because as governor of Minnesota, Pawlenty had tried to
reposition the Republican Party. He tried to rebrand it before many
Republicans even realized the party needed a rebranding.

Tim Pawlenty came up with a very clever slogan to describe the future
of the Republican Party. A future that cared more about the working man
and he tried to use that slogan as a launching point for his candidacy.

(BEGIN VIDEO CLIP)

TIM PAWLENTY, FORMER MINNESOTA GOVERNOR: We want to be the party of
Sam`s Club, not just the country club. In other words, we`ve got to expand
our party out, not by changing what we stand for, but by connecting with
people in a different way.

(END VIDEO CLIP)

KLEIN: The party of Sam`s Club. Not the country club.

Tim Pawlenty wanted the Republican Party the party of the people, not
the party of the elite people. He said it should represent the common man
and not business interests. There was even an entire book written about
it. Governor Tim Pawlenty, the Sam`s Club Republican.

The Republican Party pundit class loved it. (INAUDIBLE) high profile
reformer in the Republican Party in the last decade was the idea put
forward by Ross Douthat and Reihan Salam of Sam`s Club Republicans based,
of course, on Tim Pawlenty`s formulation.

But a funny thing happened on the way to Sam`s Club. Tim Pawlenty,
man of the people and man of the middle class interests, not the business
interests, is now Tim Pawlenty, head of the Financial Services Roundtable.
Tim Pawlenty went from touting Sam`s Club Republicanism to heading up one
of the biggest lobbying groups on Wall Street. Oh, T-Paw!

But Tim Pawlenty was not the party`s only hope. In 2010, the
Republicans scored an absolutely astonishing win. It was during a special
election in, of all places, Massachusetts. And they took back Ted
Kennedy`s Senate seat. Ted Kennedy, a Republican took Ted Kennedy`s seat.

That Republican was Scott Brown and he did it driving around the state
in his beat up green pickup truck.

(BEGIN VIDEO CLIP)

FORMER SEN. SCOTT BROWN (R), MASSACHUSETTS: My name is Scott Brown.
I`m running for the United States Senate. This is my truck. I put a lot
of miles on it during this campaign.

I love this old truck. It`s brought me closer to the people of this
state. I want to speak to them as their next United States senator.

(END VIDEO CLIP)

KLEIN: Love that truck. Scott Brown, man of the people, Sam`s Club
Republican. Everybody said Scott Brown is a kind Republican. You would
like to have a beer with. He probably would come in his truck.

Scott Brown had the same kind of appeal for the Republican Party that
Tim Pawlenty did. He was moderate. He could appeal to blue collar
Americans in blue states who didn`t see themselves as liberal, who wanted
somebody that cared about them and their sacrifices but maybe felt the
Republican Party didn`t, they felt maybe line the Republican Party was a
bit too close to banks and business interests.

Scott Brown, like Tim Pawlenty, he was a guy who could maybe talk to
those folks. Scott Brown eventually lost his Senate seat to Elizabeth
Warren and he has announced now the next chapter in his life.

Scout Brown, man of the people and man of the business class
interests, Mr. I Drive a Truck announced today he is joining the
prestigious Boston law firm where he will cater to Wall Street clients.
Quote, "The job will allow Brown to cash in on his contacts with the,
quote, `financial services industry` on Wall Street."

So there is Scott Brown smiling ear-to-ear on his first day on the job
today.

The Republican Party is in sort of a difficult position right now,
because the argument they want to make about Democrats is that Democrats
have become, that they are the party of Wall Street bailouts. They have
gotten into bed with big banks, the financial interests and they have
enshrined the idea of too big to fail.

Republicans, on the other hand, Republicans are against too big to
fail. No more bailouts for the big banks. That is what Republicans want
to argue.

But what we have seen is the banking industry is really, really loving
the Republican Party right now. In 2008, employees at the big Wall Street
banks heavily supported Barack Obama in his presidential campaign. In
2012, having seen how Democrats wanted to regulate them, they completely
flipped. They went all in for Mitt Romney and the Republicans.

Seven -- seven of Mitt Romney`s top 10 donors were big banks. And
Wall Street didn`t just donate to Republicans in big numbers. They decided
to go out and hire them too.

And so, the issue here is not simply that these ostensibly populist
Republicans turn onto it to actually be pro-bank. It`s the banks turn out
to be pro-Republican and that should make you worry a little bit. If you
believe it as a lot of people believe, as I believe, the Democratic Party
is already too friendly to the banks.

The fact the Republican Party has positioned by becoming even
friendlier, the fact the Republican Party has become the favorite choice of
Wall Street, that should probably cause you to become a little alarmed.

Joining us is Eliot Spitzer, former governor of New York and former
New York attorney general.

Governor, thanks for being here. It`s good to see you.

ELIOT SPITZER (D), FORMER NEW YORK GOVERNOR: My pleasure to be back.
Thank you.

KLEIN: So, what does a guy like Tim Pawlenty or Scott Brown what does
he bring to the banks? Why do they want to pay him to work for them?

SPITZER: Access. Understand, it`s a very simple proposition. The
banks have much at stake here. It`s calculated the guarantee for the too
big to fail institutions is worth $83 billion per year, just about the
entirety of their profits. When you line up a Tim Pawlenty and Scott Brown
and a slew of Democrats as well, you can shroud any statue that has passed,
Dodd-Frank, and tie it up into a pretzel so that even a Volcker rule which
would have been critically important still hasn`t been implemented.

The banks get too big to fail with a guarantee. We found out last
week they can`t be prosecuted. They have access to our money. They play
with other`s money and make an enormous profit. And the cost of hiring a
Scott Brown or a Tim Pawlenty is peanuts compared to what they have at
risk.

KLEIN: So, what do they want right now, right? Because, as you said,
that $83 billion number which is calculated by "Bloomberg View`, it`s in
the context even of Dodd/Frank. It`s the idea that we are still getting
this big implicit subsidy. And I actually have some concerns about that
number. Even so, there`s a real feeling Dodd/Frank was much too light on
the bank.

And so, but they are not coming to Democrats and celebrating about it.
They are furious. When you listen to Wall Street, when you talk to them,
they feel like their business is being destroyed by Washington.

SPITZER: There`s a bit of acting goes on. In other words, they put
on public pretense of being upset -- Dodd/Frank is going to destroy us.
But let`s recognize what has remained the same. The largest banks control
a largest share of deposits than they did before. Their asset base is
greater percentage of GDP. They now have an explicit guarantee, not an
implicit guarantee.

They are better positioned to weather the next storm with taxpayer
money than they were before.

So, they pretend they are being beaten up but, in reality, they won
the battle when Tim Geithner said we don`t want structural change. Barney
Frank pushed for it. But where they are right now is balancing off
basically the allegiance of senior Democrats and senior Republicans all of
whom coalesced to essentially preserve a status quo I think is dangerous
for the economy, but that`s a separate debate. Both parties participated
in this effort to preserve a structure.

KLEIN: And one thing I think is interesting in the Republican Party
recently is that while you do these sort of Pawlenty and Brown movement,
you`ve also had some Republican thinkers primarily but a couple of
Republican politicians, including Louisiana Senator David Vitter, has
joined with Ohio liberal Democrat Sherrod Brown to begin talking about
breaking up the big banks and say what we have now is uncompetitive and
almost an oligarchy.

SPITZER: The president of the Dow had a great op-ed in the "Wall
Street Journal" of all places today saying break them up.

KLEIN: He is Republican.

SPITZER: He`s a -- I assume. I mean, he is a very conservative
voice.

So, there is strain both of populism that resides within the
Republican party, certainly a populism within the Democratic Party,
regardless of party affiliation that says wait a minute, we have a
plutocracy in corporate leadership that is simply sapping the strength out
of our economy and it resides in both parties.

So, I think that is where you see the convergence between a Vitter and
a Sherrod brown or an Elizabeth Warren as well, and I think all of them are
correct. There is that populism. There`s certainly is not a critical mass
to challenge what is the accepted wisdom in the Senate which is the
existing structure is the one they want to maintain.

KLEIN: So, what do you think needs to be and what do you think needs
to be done about too big to fail?

SPITZER: I think we should end it. I think we should -- I think that
the policies that are articulated by Fisher in the op-ed today were you say
you must raise your capital, there will not be a guarantee, we say to every
customer of your banks you must sign a statement knowing you will not be
bailed out. So that if your deposit, anything above $250,000 or you`ve
bought a credit to fail swap or any other derivative from the banks, you
will not be guaranteed.

So, customers know that they will not be guaranteed. The banks will
have to pay more for capital. That will force them over time to slim down.
Plus, you do you what we did for 50 years, set absolute numerical limits on
the size of the asset bank of particular badges to shield the economy from
the downside risk of failure.

These things are easily done, they should be done, and I think when we
did it for 50 years we didn`t have a banking crisis.

KLEIN: Governor Eliot Spitzer, thank you for being here tonight.

SPITZER: Thank you, sir.

KLEIN: You couldn`t possibly thought I`d get through the show without
breaking down one chart, right? That`s never how I roll when I come here.

So, chart imitates life. Chart imitates life is straight ahead.

(COMMERCIAL BREAK)

KLEIN: Quick update on a story that led the show on Friday. The
Colorado Senate finishing the work it began last week by passing a package
of gun reform measures today. Five of the original seven bills making it
out of the chamber, they include a limit on high capacity ammunition
magazines to 15 bullets, a ban on gun ownership for people accused of
domestic violence crimes and expanded background checks.

That bill on background checked is headed to the governor for his
signature to sign it right into law. You were recall, of course, that a
gunman opened fire on a suburban Denver movie theater last summer in
Aurora, Colorado. December shooting at the Sandy Hook Elementary school in
Connecticut galvanizing reaction and action nationwide.

So, big changes are happening so far at the state level. At least in
places with Democratic control of both chambers as well as Democratic
governors.

We are still waiting to see however what actually happens at the
federal level, the national level in Washington. You can watch this space
for more updates.

KLEIN: Newly minted Secretary of Defense Chuck Hagel made a surprise
visit to Afghanistan this weekend. It was his very first trip abroad as
defense secretary. And on that very first foreign trip, Chuck Hagel
arrived to Afghanistan to the terrible news, genuinely terrible news that
an American contractor had just been killed by three people in Afghan
military uniforms.

They managed to drive onto a U.S. base in the eastern part of the
country and open fire. They shot and killed the American contractor and
wounded others just hours before the secretary of defense landed in
Afghanistan.

The following day, one day later, a big deal ceremony was planned to
coincide with the secretary`s visit. A year ago, the U.S. agreed to hand
over control of a big prison to the Afghan government. Bagram Prison is
the only prison technically run by the U.S. military designed to imprison
people for the long term. U.S. was supposed to hand over control of that
prison on Saturday. That was in the works for a year.

Journalists gathered for the ceremony, everyone was there. And then,
suddenly it was cancelled. The military isn`t saying why exactly it
cancelled the handover of the prison. But this week, Karzai said he wanted
to release a lot of those prisoners. So, that probably had a little bit to
do with.

The U.S. military said they still have some things to work out with
the Afghan government. Then after that, they work that stuff out, they
will hand over the prison at some point eventually.

Then on the same day while Chuck Hagel was in his first high level
meeting, there were two suicide bombings, one south of the capital, and one
in the capital, one very close to Secretary Hagel`s meeting. That bomber
was on a bicycle, and detonated his device in a crowd of civilians waiting
at a security check point.

Secretary Hagel was not in the compound, but he was nearby, he was
near enough to hear the blast.

In total, 17 killed in the two blasts, including children. The
Taliban took responsibility for the attack, saying, quote, "This attack was
a message to him," him being Secretary Hagel.

The next day, President Karzai accused the United States of finding
common cause, of finding common cause with the Taliban, saying the U.S. and
Taliban wanted to destabilize Afghanistan.

So, in other words, the Afghan president accused the U.S. of
essentially colluding with the Taliban after the Taliban dispatched suicide
bombers who killed almost 20 civilians. That is what the Afghan president
said on Sunday, which probably made this meeting a couple hours later
between the secretary and the Afghan president a little uncomfortable.

They did not disclose any specifics from the closed door meeting, and
a joint press conference was cancelled due to security concerns.

But not every stop on Secretary Hagel`s premier visit was off script
or filed under gone horribly awry. Hagel, the first war veteran to be
secretary of defense, presented two soldiers with Purple Hearts -- an honor
the secretary himself received twice when he served in the military as an
infantryman.

Secretary Hagel also met with General Joseph Dunford, new commander of
troops in Afghanistan. He is the 15th guy to have that job, 15th. If the
withdrawal of U.S. troops goes according to plan, he will also be the last
person to have that job.

So after a green on blue attack on Friday and two suicide bombings on
Saturday, then a cancelled transfer of control over an entire prison, also
Saturday, and then having to deal with the Afghan president accusing the
U.S. of working with the Taliban, Secretary Hagel finally left Afghanistan
early this morning local time.

Hours later, another apparent insider attack, a member of the Afghan
national security forces, he shot and killed two Americans, one of whom was
a green beret.

Last month, the U.S. led military command announced it was wrong when
it said Taliban attacks were declining. It had said that in 2012, the
number of Taliban attacks went down, but that was incorrect. They blamed
clerical errors for erroneous reporting.

And so, after announcing there were just as many Taliban attacks in
2012 as in 2011, U.S. military now says it is simply going to stop
reporting on this all together. They`re going to stop counting Taliban
attacks.

Secretary Hagel arrived in Afghanistan to news of an insider attack
that killed an American. He left to news of an insider attack that killed
two Americans, and in between those attacks were twin Taliban suicide
bombings.

You don`t have to rely on the U.S. military count to know that
Afghanistan is still a very dangerous and very war like war zone. This
weekend, our new secretary of defense, secretary Hagel, he got to see that
firsthand.

KLEIN: This photo -- this photo was posted on the interweb last week,
taken at a donut shop in New York City. It is a little fuzzy, but the gist
of what it is telling customers comes through. If you want a hot and sweet
and chocolaty beverage and you are coming to this fine establishment
because you want them to make it hot and sweet and chocolaty for you on
your behalf, then very, very soon, you`re only going to be allowed to get
it in small and medium. If you want it in a size bigger than small or
medium, you are going to need to add your own sugar on your own and your
own flavoring, too. Thanks and sorry about that.

Now, the rules are a little bit different for cold drinks, which is
confusing. So, we`re not going to actually get into that. But that this
sign exists is because of New York City Mayor Michael Bloomberg, whose
administration passed new regulations limiting the sales of certain large,
sugary drinks, but not all large sugary drinks, at some establishments
around the city. But again, not all establishments around the city.

Now, all of that wiggle room, here, not there, this but not that, a
hot medium, not a cold medium, it is a big reason why the rules will not go
into effect tomorrow as planned.

A state Supreme Court judge this afternoon blocking Mayor Bloomberg`s
limits on how big a New Yorker`s sugary drink can be. He called the rule
arbitrary and capricious. It applies to some but not all establishments in
the city, and enforcing it, the judge wrote, would make the board of health
an administrative Leviathan.

So, for now, New York, sodas as big as you want. You can have buckets
of soda, at least until we know the outcome of the Bloomberg
administration`s repeal of that ruling. And yes, in New York City, it is
called soda -- which brings us to tonight`s chart imitates life.

As we were trying to understand this afternoon`s ruling on sugary
drinks, which is a lot easier than understanding the regulations Mayor
Bloomberg wants to impose on the afternoon coffee order, we came across
this fabulous map of the U.S. It is one man`s attempt to plot if soda is
called pop or is it soda where you live.

Now, I can say soda right now because right now, I am in New York
City. And all in the Northeast, it is pure aquamarine soda country. I
also grew up in California, which is fairly solid soda country.

But I grew up in the Midwest, what looks like from Ohio and Michigan,
all the way to Washington state really, I might be more of a pop person.
The South is solidly Coke country, whether it is brand name Coca-Cola or
not. If it is fizzy and if it`s got flavoring at it, it`s Coke. It can be
great if you want it to be still Coke.

Now, I feel I should point out this map is not 100 percent scientific.
It would not peer review. It asked people whether they are pop, soda,
coke, or other person, where they grew up, hometown, state and zip code.
You answer those questions, and you too will help fill out the survey.

Now, the results seem right to us, anecdotally. Many of us took time
to fill out the survey this afternoon and play with the pretty colors on
the map. So, the chart imitates our life, life as we know it, especially
here in New York City.

That does it for us tonight. Rachel will be back tomorrow. But if
you want to see her tonight, she will be on Jay Leno`s show, on "The
Tonight Show".

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
END

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